Blue Circle to sell off heating division

BLUE CIRCLE Industries, the UK's largest cement business, is to complete its transformation into a focused cement company with the sale of its heating division. The announcement of the proposed sale came as Blue Circle warned that its core cement business was experiencing weakness in emerging markets.

The group declined to name any possible bidders or indicate a price for the heating division, Europe's market leader in the manufacturer of central heating products. The division's UK brands include Potterton boilers and Myson radiators and valves. Last year it generated pounds 44m, or 13 per cent, of group operating profits. Analysts estimate it to be worth between pounds 400m and pounds 440m.

Although the division is trading well, it has suffered with other UK manufacturing industries from the pound's strength against the euro. Blue Circle was unwilling to invest in acquiring European heating rivals to make it competitive.

One analyst said: "Blue Circle has pulled off a remarkable transformation into a pure cement company. Investors have been prodding the company to do this for years."

The proposed disposal follows the sale earlier this year of Blue Circle's bathrooms division. Chief executive designate, Rick Haythornthwaite, who officially heads the company from 15 July, said: "Consolidation will be the next step in the heating industry. Our decision to sell the division reinforces our strategy to focus on the attractive heavy building materials sector. We should complete the sale in the third quarter."

Meanwhile, Blue Circle issued a disappointing trading statement. It said that volumes in its core building materials activities in Asia were well down on last year. It was suffering from very weak pricing in Malaysia, where demand was down 34 per cent. Cement volumes in South America in May were 28 per cent down year-on-year. But in North America, volumes were up 11 per cent year-on-year.

Blue Circle is being advised by Lazard Brothers on the disposal of the heating division.